The financial services company headquartered in Purchase, New York, MBIA Inc. (NYSE: MBI) shows signs of an upcoming price surge according to its latest charts.
Bullish Indications
#1 Consolidation Area Breakout: The daily chart shows that the stock was trading within a consolidation area for the past several months. This is marked in the daily chart in a pink color rectangle. Currently, the stock is moving higher after breaking out of this consolidation area with a high volume. Once a stock breaks out from a consolidation area, it usually moves higher.
Daily Chart – MBI
#2 Above MAs: The stock is currently trading above its short-term moving average of 50-day SMA as well as the longer-term moving average of 200-day SMA, indicating the overall bullishness of the stock.
#3 MACD above Signal Line: As you can see from the daily chart, the MACD line (blue color) is currently above the signal line (orange color). This indicates a possible bullish bias.
#4 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the daily chart. This indicates possible bullishness.
#5 Bullish ADX and DI: The ADX indicator shows bullishness because the (+DI) line and the ADX line are greater than (-DI), and ADX has started to move up from below (-DI) and (+DI) lines.
#6 Downtrend Broken: The weekly chart shows that the stock has currently broken out of its short-term downtrend. The downtrend line is marked in purple color. The stock is also trading above its 50-week as well as 200-week SMA. All these are possible bullish indications.
Weekly Chart – MBI
#7 Bullish Stoch: The weekly chart shows that the %K line is currently above the %D line in the daily chart. This is a possible bullish sign.
#8 Bullish MACD: In the weekly chart as well, the MACD line is currently above the MACD signal line. This is a possible bullish indication.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, the ideal buy level for MBI is if it corrects to a price near the breakout level of the consolidation area, at around $8.70. However, you can purchase half the intended quantity of shares of MBI if it trades above yesterday’s high, at a price of around $10.10.
TP: Our target prices are $14 and $17 in the next 3-6 months.
SL: To limit risk, place a stop loss at $5.90. Note that this stop loss is on a closing basis.
Our target potential upside is almost 61% to 95% in the next 3-6 months.
- Entry near $8.70: For a risk of $2.80, our target rewards are $5.30 and $8.30. This is almost 1:2 and 1:3 risk-reward trade.
- Entry near $10.10: For a risk of $4.20, our target reward (TP#2) is $6.90. This is almost risk-reward trade.
In other words, this trade offers nearly 2x to 3x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the consolidation area. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the sector.
Happy Trading!
— Tara
3 stocks to Change Your Life [sponsor]Brace yourself... because I'm about to flip everything you thought you know about dividend investing on its head. I'm going to show you how you can achieve 101% yields from dividends in just a few years. Best of all, it's as easy as buying 3 stocks and clicking a few buttons. And if you invest in these 3 stocks, you'll never have to worry about a bear market again. Folks it's time to take control of your retirement. Let me show you the way. Click here to discover how 20,000 other retirees are earning 101% yields from their dividends.